TL;DR
- Careful crypto curation is the key to success when investing in the digital asset. If you’re a first-time cryptocurrency investor with ₹10,000 to spare, here is how you can start your investment journey.
- Before investing in a cryptocurrency, learn everything you can about it- pros, cons, utility, history, etc. You can also join a crypto community to understand the sentiment around the asset.
- Next, shortlist cryptos using fundamental and technical analysis. They help you evaluate a crypto based on crucial factors like utility, volatility, etc.
- Decide your risk-to-reward expectations. The volatility and long-term vision of the cryptos you choose will help you arrive at this.
- To cap it off, invest your money in a variety of assets to diversify your portfolio and minimize risk while maximizing returns. Coin Sets is a useful little product that can help you with this.
Introduction
Have you seen the cartoon, Richie Rich?
P.S. you can skip the introduction if you want to jump straight to the meat.
In that cartoon, there is Richie, who is the son of a billionaire business tycoon. Gloria is her special friend, and Reggie is his jealous cousin who always tries to steal his money and pull pranks on Richie. To become popular and rich overnight, we see Reggie trying shortcuts and erroneous techniques but failing constantly. Richie, on the other hand, avenges any situation with his wit and patience.
The summary is that Reggie’s shortcuts didn’t win him any money, and Richie’s ability and intellect helped him maintain his victorious position. How is this relevant? While this is just a cartoon, we can very well apply this to today’s generation for cryptocurrency investments.
Cryptos are, without a doubt, a very lucrative investment asset class. Bitcoin, Ether, and other cryptos have yielded enormous returns. However, the issue lies in the fact that novice investors indulge in this ocean without much due diligence or with a greedy mindset like Reggie, which may backfire on them.
You need to know how to invest in crypto and, more importantly, where to invest, to eventually grow your portfolio. Risk is a part of the investment process. However, careful crypto curation is the key to success. As a first-time cryptocurrency investor, here is how you can start your investment journey.
How to Make Your First Crypto Investment?
Investing in cryptos for the first time is exciting and challenging at the same time. You might dwell upon where you can invest and get better returns. After all, the crypto universe is a big space to explore.
To make it simple, let’s understand it step by step. Suppose you are planning to invest $100 (₹10,000) in cryptocurrencies; here is how you may plan it.
1. Gain knowledge of the cryptocurrency you want to invest in
Ask yourself how much you know about the cryptocurrencies that you want to invest in – their types, pros, cons, volatility, etc. This is a prerequisite to investing in cryptos. While all cryptos are based on blockchain and appear to function similarly, they have different utilities.
For example, Bitcoin is a payment token, but Ether is the native token of the Ethereum blockchain that enables Dapp development. Hence, they derive their value differently. You need to know this before investing your money.
Once your basic understanding of the crypto you want to invest in is clear, the next step is to research them by reading experts’ articles, joining a crypto community, etc. It will help you gauge the sentiment of the overall crypto market about that specific crypto.
2. Analyze the performance
This is the second step. Like stocks, cryptocurrencies can also be evaluated using fundamental and technical analysis. While fundamental analysis evaluates a cryptocurrency based on the problem it is trying to solve and how it fares against its competitors, technical analysis helps you understand its price history and volatility, etc.
Both these analyses help you in deciding which cryptos you should choose for your first $100 (₹ 10,000).
It will shortlist cryptos from the list that you might have come up with in step 1.
3. Decide on a risk-to-return ratio
While you are at it, also decide your risk-to-reward expectations. In simple words, it means how much you can afford to lose in order to gain returns. If it is 2:1, it means to earn ₹1 return, you are willing to risk ₹2 if things go south. Cryptos are highly volatile, and thus, considering that fact in your return expectations is crucial.
Decide the return you expect for putting in $100 (₹10,000). The volatility and long-term vision of the cryptos you choose will help you arrive at this.
4. Invest your money and diversify
This is the last step where you actually invest your money. If you think everything we spoke about above has helped you find that one gem of an investment and want to put all your money into it, please don’t.
You might be tempted to invest your first ten grand in the hotshot Bitcoin or some other emerging shitcoin, but never put all your eggs in one basket.
While Bitcoin is a good option, diversifying your ₹10,000 in other cryptos has its own benefits. Eventually, you can increase your exposure to individual cryptos.
For example, divide your ₹10k into a few parts and variations, such as:
- ₹5k in Bitcoin and the rest in other cryptos like Ethereum
- ₹3k in Bitcoin, 3k in Ethereum, and 3k in Cardano or Polkadot
- ₹2k in Bitcoin, 2k in Ethereum, 2k in Cardano, 2k in Solana, and 2k in Binance Coin
P.S. The split will be based on your research.
This will help you hold your ground when one of these coins faces higher volatility. Your overall risk will reduce, and you will get a well-constructed portfolio. It will work as a safety net for you in tough market conditions.
Wondering how you can decide on this diversification ratio? Well, at Mudrex, we have made it easier for you. We offer amazing basket of cryptos under Coin Sets with well-executed diversification ratios.
For example, if you want to invest in only the popular cryptos, we offer Crypto Blue Chip that includes Bitcoin, Ethereum, Binance Coin, Ripple, and Cardano.
Alternatively, you can diversify among various Coin Sets. It will widen your exposure further. For instance, if you want to play safe, you may put 50% of your investment amount in the Crypto Blue chip Coin Set and spread the rest 50% among slightly riskier Coin Sets like New Crypto Stars, Smart Contracts Platform, etc.
Sounds exciting? Then what are you waiting for? Start your investing journey today with Mudrex and grow your money!
To Sum Up
Investing is all about research, consistency, and patience. Research the assets/sectors you are interested in investing in and consistently invest in them with patience. The patience part of the equation is the most important. If you trust your research, it should help you consistently be at it, despite no/negative movements. And this patience will pay you in the long run.
